Stormwater Management Utility

This appendix provides plain-language responses to common questions about stormwater utilities. It is intended to support communication with elected officials, municipal staff, stakeholders, and the public. Communities should adapt these responses to reflect local conditions, adopted policies, legal review, and the specific stormwater utility program being considered:

What is a stormwater utility?
A stormwater utility is a dedicated funding mechanism for stormwater management services. These services may include operation and maintenance of storm sewers, catch basins, culverts, ditches, detention facilities, flood mitigation projects, water quality improvements, regulatory compliance, planning, public education, billing administration, and customer service.

Stormwater utilities are commonly structured like other municipal utilities. The fee is typically based on a property’s contribution to stormwater runoff or demand on the stormwater system.

Why do communities establish stormwater utilities?
Communities establish stormwater utilities because stormwater systems require ongoing investment. Storm sewers, culverts, ditches, detention basins, outfalls, and related infrastructure must be inspected, maintained, repaired, and replaced over time. Communities may also need funding to address flooding,improve water quality, comply with MS4 permit requirements, implement capital improvements, and plan for future

A stormwater utility provides a dedicated, transparent funding source for these activities, rather than relying solely on general funds, road funds, or other sources that may not be directly tied to stormwater services.

Is a stormwater utility fee a tax?
No. A properly structured stormwater utility fee is intended to be a service-based fee, not a tax. The distinction is especially important in Michigan. A stormwater utility fee should be tied to stormwater services, reasonably proportional to the service provided or demand placed on the system, and used only for stormwater-related purposes.

Why is impervious area commonly used to calculate stormwater fees?
Stormwater utility fees should be based on the program’s cost drivers. In many communities, the highest costs are associated with stormwater infrastructure,such as storm sewers, culverts, detention facilities, drainage improvements, flood mitigation, and water quality practices.

Impervious surfaces-such as rooftops, pavement, sidewalks, driveways, parking lots, and compacted surfaces-generate more runoff than natural or pervious areas. A more impervious area generally means more runoff, which creates a greater demand for conveyance, storage, treatment, and maintenance. For this reason, impervious area is commonly used as the basis for allocating stormwater utility costs.

In some communities, particularly where the stormwater program focuses more on regulatory compliance or administration than on infrastructure, other or blended billing methods may be considered. The key is that the billing basis should reasonably reflect the services provided and the costs being funded.

Who is billed?
The properties subject to a stormwater utility fee depend on the local ordinance, rate methodology, and service area. In many communities, developed parcels that contribute runoff to the public stormwater system or receive stormwater management services are billed.

Residential, commercial, industrial, institutional, and tax-exempt properties may all be included if they contribute runoff or receive stormwater services. The utility should clearly define which properties are subject to the fee and how special cases, exclusions, credits, or adjustments are handled.

Are tax-exempt properties billed?
Yes. Tax-exempt properties are commonly included in stormwater utility billing when they contribute runoff to the public stormwater system or receive stormwater management services. These may include schools, churches, hospitals, universities, government facilities, and other tax-exempt properties.

The reason is that a stormwater utility fee is based on stormwater service or system demand, not property tax status. Tax-exempt properties may have large buildings, parking lots, and other impervious surfaces that contribute runoff to the system.

How are stormwater utility fees used?
Stormwater utility fee revenues should be used only for stormwater-related purposes. These may include operation and maintenance, capital improvements, regulatory compliance, water quality programs, flood mitigation, planning, asset management, billing administration, credit and appeal administration, customer service, and public education.

The utility should maintain clear accounting procedures so that stormwater revenues are not used for unrelated municipal purposes.

Can stormwater utility fee revenue be used for road projects or county drain costs?
Stormwater utility fee revenue should not be used for general road costs. However, some road projects include stormwater-related components, such as storm sewer replacement, drainage improvements, catch basin work, culvert replacement, green infrastructure, or water quality treatment. For multi-benefit projects,the stormwater-related share of cost should be documented.

In some Michigan communities, stormwater utility fee revenues may also be used to pay eligible costs associated with county drains or regional drainage infrastructure, provided those costs are tied to stormwater services and properly documented.Some communities may use utility revenues to pay drain assessments that would otherwise be charged directly to individual property owners, helping avoid duplicative stormwater-related charges.

Can property owners reduce their stormwater fee?
Yes. A stormwater utility should provide a clear process for property owners to reduce their fee when they reduce their stormwater impact or can demonstrate that the billing data should be corrected.

Because stormwater fees are often based on Impervious area,one way to reduce the fee is to reduce the amount of impervious area on a property. For example,removing pavement, replacing impervious surfaces with pervious surfaces,or otherwise reducing measured Impervious area may reduce the billing basis and, in turn, the fee.

In addition, stormwater utilities should include a credit program that allows property owners to receive a fee reduction for approved stormwater practices or activities that reduce runoff, peak: flow, or demand on the municipal stormwater system,or improve water quality and support stormwater program goals. Examples may include detention or retention systems, infiltration practices, green infrastructure,water quality treatment, direct discharge, privately maintained stormwater systems, or approved stewardship activities.

Credit and fee reduction procedures should be clearly defined and should include eligibility criteria, documentation requirements, verification procedures, renewal requirements, and maximum credit limits.This is especially important in Michigan,where stormwater utility fees should be structured to maintain a reasonable relationship between the charge and the stormwater services provided.

What happens if the billing data are wrong?
The utility should include a process for correcting billing data. Common issues include incorrect impervious area, parcel classification errors, ownership changes, duplicate billing, parcelsplits or combinations, or missing account information.

A clear billing adjustment process helps maintain fairness, transparency, and public trust.

How are rates developed?
At a basic level, stormwater utility rates are developed by identifying the funding needed to provide stormwater services and dividing that revenue requirement by the total billable units, such as equivalent residential units or measured impervious area. The resulting unit rate is then applied to properties based on the adopted rate structure.

Final rates should be supported by documented costs, local data, clear assumptions, financial review, and governing body action.

Can multiple communities work together on a stormwater utility?
Communities may coordinate stormwater utility development, data management, billing support, public communication, credit policies, and regional project funding. Coordinated local utilities or shared administrative services may reduce costs and improve consistency.

A more centralized model in which one regional entity directly imposes a parcel-level stormwater utility fee across multiple municipalities is more complex and should be evaluated carefully under Michigan law.

What should a community do before deciding to move forward?
Before deciding to move forward, a community should understand the stormwater services it wants to fund,what those services cost, what data are available to support billing, what rate structures are feasible, how typical and high-impact properties may be affected, whether billing and administrative systems can support the utility, what stakeholder concerns need to be addressed, and what legal, financial, and governance steps are required.

This feasibility work helps the community decide whether to proceed, refine the approach, modify the scope, or pause the effort. Refer to Section 3 Phase 1 – Feasibility and Decision Readiness.